Abstract
In 2013, China launched its ambitious Belt and Road Initiative (BRI), a large portfolio of infrastructure projects across 71 countries intended to link Eurasian markets by rail and sea. The state-led nature of the Initiative combined with its transformative geopolitical implications have conditioned the type of engagement that many governments and firms in host and third countries are willing to take in Chinese-funded BRI projects. Building on two theoretical streams that have originated in international political economy but have received growing attention in international business, varieties of capitalism and geopolitics, this perspective shows how a greater understanding of the institutional and geopolitical context surrounding BRI helps decipher the selection of host-country firms and third-country MNEs in Chinese-funded BRI projects. We portray firm selection in a BRI project as the outcome of a one-tier bargaining game between China and a host country. We show how institutions and geopolitics influence both the legitimacy gap of Chinese SOEs in a host country and the host country’s relative bargaining power, affecting the likelihood that host firms and third-country MNEs are selected in BRI projects. We also discuss the geopolitical jockeying strategies that these firms can adopt to influence the outcome of the bargaining game.
Highlights
In 2013, China launched a global development strategy named the ‘‘Belt and Road Initiative’’ (BRI)
Since our focus in this paper lies on the selection likelihood of local firms and third-country multinational enterprises (MNEs), we suggest the following proposition: Proposition 5: Geopolitical jockeying by local firms and third-country MNEs positively moderates the effects of the Chinese state-owned enterprises (SOE)’ legitimacy gap and the host country’s relative bargaining power on the likelihood that a local firm or a third-country MNE gets selected to participate in a BRI project
Building on Li et al (2013), but complementing it with institutional and geopolitical drivers, we suggest that Chinese-funded BRI projects can be depicted as a one-tier bargaining game between China and a host country which helps determine the participation of host country firms and third country MNEs along the Belt and Road
Summary
In 2013, China launched a global development strategy named the ‘‘Belt and Road Initiative’’ (BRI). Touted as the most important international development program of the 21st century and as ‘‘China’s Marshall Plan’’ (Casas-Klett & Li, 2021; Shen & Chan, 2018), the plan consists of developing multiple infrastructure projects to connect Eurasian markets with China by rail and sea, linking at least 71 countries and involving investments that are predicted to grow to over USD 1 trillion by 2027 (Li, Liu & Qian, Li, Liu, et al, 2019; Macaes, 2018). In 2015, China added the Digital Silk Road to the program with the aim of improving BRI host countries’ telecommunications networks, artificial intelligence. BRI projects provide these countries with the opportunity to address these infrastructural gaps at a cost that is lower than they would be able to receive elsewhere, which may allow them to improve their trade, foreign direct investment (FDI), and welfare in the future (Eurasia group, 2020)
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